Recently, due to the energy crisis, global commodity fluctuations have been sharply fluctuated, and the supply crisis caused by the epidemic and the weakening of demand have been intertwined, which has highlighted the strength of agricultural products, because the demand for agricultural products is relatively rigid.
Take soybean oil, palm oil, vegetable oil three major oils, even in the context of the black, chemical sector deep correction, still all the way up. The main logics are: global production cuts, labor shortages, and rigid demand.
According to the data of 2020, Indonesia is the largest producer of palm oil, accounting for 60% of the global production and Malaysia 24%. The two largest demanders for palm oil are India and China, which account for 12% and 9% of the total global demand, respectively. India and China are not self-sufficient and need to import, with India accounting for 16% of total global exports and China accounting for 14%.
Spot Status:
As of October 25, 2021, the spot price of 24-degree palm oil in Guangdong was 10,380 yuan / ton, up 140 yuan / ton from the previous trading day. The price of the main futures contract was 9,580 yuan / ton, up 164 yuan / ton from the previous month. From a seasonal point of view, the current spot price of 24 degrees palm oil in Guangdong has remained at a high level compared with the past 5 years.
Production:
Indonesia's production has been at a good level this year, so although Indonesia is the largest producer, it is not the root of the problem. According to the Indonesian palm oil production data given by GAPKI, the cumulative output from January to August was 33.57 million tons, an increase of 1 million tons over the previous year. Indonesia's exports of palm oil and refined products rose 59% y-o-y to 4.27 million tonnes in August, an increase that is tied to strong demand from India and China. On October 13, the Indonesian president plans to stop all exports of crude palm oil and export only the value-added products of crude palm oil, which will have a greater impact on the supply of crude palm oil in the future.
From January to September this year, the cumulative output of horse palm was 13.31 million tons, compared with 14.59 million tons in the same period last year, a cumulative year-on-year decline of 9%. El Niño in mid-2020 is basically over, and entered La Niña state from the end of 2020 to the beginning of 2021, corresponding to palm oil, which should be in a bumper production cycle this year, but the actual production data is not ideal.
A major reason for the lower than expected production was the shortage of labour caused by the outbreak, which, although the outbreak in Malaysia has now eased, the impact on the plantation workforce remains. A preliminary market survey conducted by the Malaysian Palm Oil Council (MPOB) at the end of April 21 calculated a shortage of 31,021 palm oil workers. Previously, the government planned to introduce 32,000 foreign workers, but due to problems such as isolation and management, it is difficult for workers to be in place this year.
Demand situation:
India's strong demand for palm oil, coupled with the reduction of vegetable oil import tariffs, greatly stimulated India's imports of palm oil, as can be seen from the data on the chart, August and September import data soared, breaking through the 5-year high.
Import tariffs: On September 11, the Indian market reduced the import tariffs on vegetable oil, and the actual tariffs on the import of raw palm oil, edamame oil and sunflower oil were reduced to 24.75%, which was previously implemented at 30.25%, and the tariffs on refined palm oil, refined soybean oil and refined sunflower oil were reduced to 35.75% in September, and previously implemented according to 41.25%. On October 14, the Indian market once again significantly lowered import tariffs, crude palm oil to 8.25%, edamame oil and sunflower oil to 5.5%, refined palm oil, refined soybean oil, refined sunflower oil to 19.25%.
Domestic inventory, in mid-October, coastal edible palm oil inventory of 440,000 tons, an increase of 70,000 tons month-on-month, an increase of 90,000 tons year-on-year, the increase in inventory is mainly due to the decline in goods, and weather, profits. However, inventories are at a relatively low level, which has some support for prices. Recently, import profits have fallen again, limiting palm oil imports and restricting the supply of palm oil in the country.
summary:
In the context of the reduction of global agricultural production, it is necessary to focus on the two-way impact of the epidemic on supply and demand, and the current demand for agricultural products is rigid, and the suppression of supply by the epidemic is still strong. Judging from the production of Malay and domestic inventories, the short-term gap in palm oil is difficult to balance, and the upward space may still exist. In the future, we will also need to pay attention to the changes in the Malay labor gap and the changes in India's import volume data.
■ Part of the data in this article comes from wind, Ruida Research Institute, MPOB, GAPKI, SEA, SDIC Anxin Futures, my agricultural products network, for reference only, does not represent the views of this platform and its institutions, and is at your own risk. The futures market is risky, and investment needs to be cautious!